By Lydia Beyoud
Marketplace lenders and their bank partners are keeping a close eye on a bill to make it easier for the Internal Revenue Service to share taxpayer data they say is critical to their industry.
The bill received support during a House Ways and Means member hearing on legislation to improve tax administration through technology, as well as a fintech hearing in a House Financial Services subcommittee.
During the tax hearing, Rep. David Schweikert (R-Ariz.) called on his colleagues to embrace “modern technology and this thing called the internet to make it more efficient and more simple for Americans” to get a loan.
The IRS Data Verification Modernization Act (H.R. 3860) and its Senate companion (S. 1958) would require the Internal Revenue Service to provide a fully automated software protocol for companies to immediately retrieve taxpayer information to verify income. Currently, the process for the IRS to release taxpayer data requires a faxed form and can take days or weeks to turn around.
While the bills have bipartisan support in both chambers, including from its two sponsors, Rep. Patrick McHenry (R-N.C.) and Sen. Cory Booker (D-N.J.), they’ve lingered in their respective committees, House Ways and Means and Senate Finance. But the fintech industry believes the unflashy legislation holds a great deal of promise in changing consumer access to credit and potentially boosting revenues for their industry. Representatives for coalitions of fintech companies, including Amazon.com Inc., Intuit Inc., Google parent Alphabet, Inc., Funding Circle, Prosper, LendIt, Peer Street, and Upstart asked House lawmakers to approve the bill during the Jan. 30 fintech hearing.
“The value of this small technology upgrade far exceeds simply speeding up verification,” Sam Hodges, co-founder and US managing director for Funding Circle, an online small-business lender, told Bloomberg Law. That’s because it would give lenders a better sense of a company or individual’s creditworthiness, potentially with better rates for consumers.
“More and better data leads to better underwriting and instant, secure availability of tax return transcripts through an API would drive higher approval rates, better pricing, and faster decisioning,” Hodges said via e-mail.
Banks that partner with fintech companies also support the legislation. “The IRS rule is really critical,” Cross River Bank’s President and CEO Gilles Gade told Bloomberg Law.
The 10-year-old, single-branch bank in Teaneck-N.J., has partnered with several marketplace lenders, including Upstart and Green Sky Credit, providing a fast-track for the fintech firms to hop onto the rails of the banking system and the regulatory compliance inherent to accessing borrowers. Cross River Bank has benefited from the fintechs’ nationwide reach and marketing savvy.
The IRS data verification bill would avoid loan stagnation as underwriters go through what’s currently a lengthy process of application processing, data validation and loan authorization, Gade said. “The sale cycle of loans could be shortened dramatically,” he said.
The legislation, which Gade called “critical” to the marketplace lending industry, would also help the agencies “get on the same page as the fintech players, to be able to enable them to better serve consumers and businesses,” Gade said.
To contact the reporter on this story: Lydia Beyoud in Washington at email@example.com
To contact the editor responsible for this story: Michael Ferullo at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)